Vivendi/Universal: What will happen to the kids?

The US$100-billion merger of French communications giant Vivendi, Canadian entertainment and drinks group Seagram and French pay-TV broadcaster Canal+ is ground-breaking in one very important respect-it brings together the content creation capabilities of a U.S. studio, Universal, with broadcast distribution in...

The US$100-billion merger of French communications giant Vivendi, Canadian entertainment and drinks group Seagram and French pay-TV broadcaster Canal+ is ground-breaking in one very important respect-it brings together the content creation capabilities of a U.S. studio, Universal, with broadcast distribution in 10 European territories.

Even Rupert Murdoch cannot claim this sort of synergy. With Fox in the U.S., BSkyB in the U.K. and a stake in Germany’s Kirch Gruppe, Murdoch is well placed to manage product flow to his own advantage. But the creation of Vivendi Universal fundamentally redefines a TV market driven top-to-bottom by U.S. output deals.

The deal is undoubtedly a good one for Vivendi-though the City is struggling to come to terms with it. One analyst says: ‘The market is having difficulty digesting these very big transactions in a media industry that is becoming more and more capital-intensive and with an earnings visibility more and more reduced.’

It will also be some time before the impact of the merger filters through to the world of kids content. But when it does, there are three key questions. Firstly, does U have sufficient high-quality kids material to launch a channel? Secondly, can Canal+ create the sort of kids material that might play well in the U.S.? Thirdly, can U movies act as a locomotive to drive sales of Canal+-financed animation?

U is not averse to launching themed channels in Europe. Although it came late to the party, it has had some success with movie network Studio Universal, action brand 13th Street and The Sci-Fi Channel. Nevertheless, U’s kids biz does not have the depth of rivals such as Cartoon, Nickelodeon, Fox Kids and Disney. Although U boasts classic properties such as Woody Woodpecker, Rocky & Bullwinkle, An American Tail and The Land Before Time, it is probably a case of too little, too late. Despite the new access to distribution via Vivendi, Universal would probably have already launched a kids channel if it felt it was a viable proposition. The only area where the new alliance might make a difference is in exploitation via on-line platforms-a sector in which Vivendi is well advanced.

That said, there is movie spin-off potential in properties like Babe and a growing business in the U.K. thanks to U’s previous acquisition of PolyGram. Loredana Cunti, senior VP at London-based Universal Pictures Visual Programming, says it is ‘business as usual’ at present. The company is working on the exploitation of animated series Maisie (104 x five minutes), which has just been sold to NHK in Japan. It is also well advanced on Sitting Ducks, a series targeted at six- 11-year-olds and based on work by pop artist Michael Bedard.

The second part of the equation is arguably more interesting. Canal+ is already an active producer and financier of animation. Over the last year, it has introduced long-running series such as Fracasse, Pirate Family, Nick and Perry, Alien Dogs, Blazing Dragons and Kings & Queens to the market. It also has live-action titles such as Animal Rescue Kids. There is clearly a desire in the U.S. to secure animation at acquisition prices, but since U does not have any U.S. outlets of significance to Canal+, it will still have to go to other networks to secure sales of existing products. Nevertheless, ‘it is clearly easier to break into the U.S. if you are connected,’ says Angus Fletcher, joint head of global television at Jim Henson Television, which was recently acquired by Germany’s EM.TV. ‘It would be a very interesting step if deals like this meant that U.S. networks opened up to a wider range of shows.’

Where the merger might make a difference to the Universal/Canal+ kids business is co-production. The network of interests within the expanded Vivendi Universal family, centered on a U.S./U.K./French axis, should make it possible to secure funding for shows with greater ease than in the past. Canal+’s presence in the French market might also tap CNC subsidies for U-originated shows.

Finally, there is the question of sales. U’s must-have movies and dramas may open doors for Canal+’s kids product on the international market. Universal’s prowess as a merchandiser might also benefit Canal+ properties.

If so, it will be harder for independant kids producers to garner opportunities, though Fletcher believes ‘cracking creativity is the key for these big mergers. A blockbuster U.S. movie might help you get a package of European kids shows into a market. But the broadcaster won’t necessarily air them-or help you build a franchise around them.’

The great unknown in the whole equation is Vivendi’s interests in Rupert Murdoch’s BSkyB. Vivendi chairman Jean-Marie Messier is keen to be number-two shareholder in Sky’s global digital ambitions-which are now housed within Sky Global Networks. But the two companies are still very wary of each other.

With Murdoch (and Saban) so heavily committed to the rollout of Fox brand, the long-term play might involve VU product channeled in the direction of Fox Kids platforms on a first-look basis-but there is a long way to go before that becomes a commercial reality.